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Sending Money – the Stagnant Status Quo
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Sending Money – the Stagnant Status Quo

Money has a key role to play in nearly all aspects of modern society. For many developed countries, the difficulties of sending money are not as apparent as they are in the developing world.

However, even the largest multinational corporations face challenges when handling funds and managing their financial supply chain.

It all comes down to the fundamental problem that money, in its current form, is still analog, despite the technological advances and opportunities that have emerged in recent years.

To send money throughout the financial system, users and entities are required to go through an expensive chain of payment and banking intermediaries that add not only cost but also additional time to payment transactions.

A lot of complexity in this system is due to the fact that payment solutions and financial services are often siloed, have difficulty interacting with each other across international borders, and are built upon outdated legacy systems (IIF, 2017).

Navigating the complexity can be a headache! (Adobe Stock/Carl Jenster)

Another reason for the high cost associated with payments is that increasingly complex requirements for anti-money laundering add administrative costs and a need to de-risk.

Many banks do not have a direct relationship with one another, meaning that vast cross-border banking networks, with multiple correspondent banks, need to be in place, which ultimately adds costs for every new entity a transaction must pass.

It is no wonder, though, that the established players do not wish to change the system.

In 2017, the global payments revenue was $1.9 trillion and is estimated to grow to $2.9 trillion in 2022.

The lack of alternatives has, thus far, allowed incumbent players to dominate the space, and dictate fee structures and policies to their benefit.

However, with distributed ledger technologies, opportunities to improve infrastructure, and address gaps in the market are on the rise.

Global payments is an enormous and profitable industry. (Adobe Stock/Carl Jenster)

The time for change is now!

As our economies become more and more interconnected and global income inequality grows, it is now more important than ever to solve the issues that have become inherent with legacy systems.

Distributed ledger technologies have gone through the discovery phase to having actual use-cases which are highly relevant to many of the issues outlined by the United Nations’ Sustainable Development Goals, as well as problems in financial services, banking, and payments.

Blockchain is here to stay. (Adobe Stock/Carl Jenster)

Distributed ledgers and blockchains propose viable solutions for overburdened, and expensive value delivery- and management-chains.

By reducing the need for intermediaries, proposing increased security, enabling accessibility in the far reaches of the world, and adding mechanisms for identity management, vast improvements can be made to the stagnating infrastructure.

Blockchain technology is disruptive – yes, but it is disrupting a system, which is ripe for change, and blockchain presents a reliable solution more than anything else.

The tides of technology are coming in. (Adobe Stock/Carl Jenster)

Case in point, the annual value of the human trafficking market is roughly $150 billion.

Furthermore, the annual value of the global illegal drug industry is estimated to be worth between $465 billion and $650 billion per year. For the sake of comparison, the GDP of Sweden is roughly $551 billion.

These funds inevitably flow into the financial systems of the world. The primary issue is that it is difficult to trace funds in the current systems – blockchains can play a crucial part in solving that.

The current financial systems are based on fractional lending through the expansion of money, which is arguably one of the chief causes of the Great Recession in 2007/2008.

As the global economies become increasingly dependent upon each other, so does the risk of another major global financial crisis (Cheng & Yang, 2017).

Central banks, together with regulators and politicians, can to some extent control the risks associated with credit expansion, but only to a certain extent.

Rethinking the way we handle primary money in a non-leveraged fashion is now possible because we can keep money safe using distributed ledgers, without engaging in fractional lending (Kumhof & Benes, 2012).

The time for change is now. Digital, DLT-based payments companies, like ARYZE, tread the line between modern and traditional, providing a compliant solution to stagnating legacy systems and financial exclusion.

Through state-of-the-art design principles and trusted partners, they set out to solve intricate systemic problems and supply the vital, innovative elements for the future of finance and global payments.

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